Judgment summary
The Tax Appeals Tribunal at Nairobi determined an appeal by Yarde Park Lounge Limited against an Objection Decision issued by the Commissioner for Domestic Taxes on 15th September 2025.
The Objection Decision upheld an additional tax assessment of Kshs. 593,481,355.00 for corporation income tax and VAT, inclusive of interest and penalties, covering the period January 2020 to December 2021.
The Tribunal considered whether the Objection Decision was justified and, having reviewed the pleadings and records, found that the Appellant had not sufficiently supported its objection and had not discharged its burden of proof. The Appeal was dismissed and the Objection Decision upheld.
Background
The Appellant is a limited liability company incorporated in Kenya (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, mandated with collection and administration of tax laws (para 2).
On 16th May 2025, the Respondent issued a Notice of Intention to audit the Appellant's tax affairs for the period January 2020 to December 2021. On 23rd June 2025, the Respondent issued a Notice of Audit Findings and additional tax assessment of Kshs. 593,481,355.00 for corporation income tax and VAT, inclusive of interest and penalties (para 3).
On 18th July 2025, the Appellant filed its objection. Following correspondence and meetings in which the Respondent invited the Appellant to validate its objection with supporting documents (para 4), the Respondent issued its Objection Decision on 15th September 2025, upholding the additional assessments (para 5).
Aggrieved, the Appellant lodged the appeal via Notice of Appeal dated 14th October 2025 (para 6).
Core dispute
The Appellant's Memorandum of Appeal dated 27th October 2025 raised grounds including: incorrect reconciled banking variance; incorrect computation of additional VAT on exempt sales relating to supply of dry maize for milling to Kingmall Flour Millers Limited under Chapter 10 tariff heading 1002; disallowance of 40% of purchases for lack of receipts, said to be due to the practical difficulty of obtaining invoices when buying maize directly from farmers; alleged contravention of Section 3(2)(i) as read with Section 4 of the Income Tax Act (cap. 470); use of a speculative approach despite documentary evidence provided; unreasonable, capricious and malicious conduct; and breach of the doctrine of legitimate expectation (para 7).
The Appellant contended that the Respondent disregarded information and explanations provided during the audit and following the Pre-Assessment Notice, and that VAT should not apply to its supply of dry maize to a miller (paras 9-10).
The Respondent contended that the additional assessments were based on disallowed unsupported expenses and undeclared income arising from variances in the Appellant's VAT and income tax declarations, and that the Appellant provided only bank statements, audited accounts and a contract at objection stage, failing to provide further documents sought under Sections 23, 58 and 59 of the Tax Procedures Act (paras 14-15). The Respondent maintained the assessments were properly made on available information and its best judgment (para 16).
The issue for determination was whether the Respondent's Objection Decision dated 15th September 2025 was justified (para 19).
Court findings
The Tribunal noted that the Respondent, by email of 12th August 2025, had sought specific documents from the Appellant, including bank statements, audited accounts, expenses ledgers/schedules, expenses records, sales and purchases ledgers, sample sales invoices and agreements, and any other supporting evidence (para 24).
The Tribunal found that the Respondent had explicitly stated the relevance of the documents sought in validating the objection, which could have led to variation of the assessments, but there was nothing on record showing the Appellant had provided those documents in accordance with the applicable law (para 25).
The Tribunal referred to Section 59 of the Tax Procedures Act (cap 469B) on the Commissioner's power to require production of documents (para 26), Section 56(1) of the Tax Procedures Act placing the burden on the taxpayer to prove a tax decision is incorrect (para 27), and Section 30 of the Tax Appeals Tribunal Act (cap 469A) placing the burden on the appellant to prove an assessment is excessive or that a tax decision should not have been made or should have been made differently (para 28).
The Tribunal cited its earlier decision in Abyssinia Iron and Steel Ltd v Commissioner of Customs and Border Control (TAT No. 435 of 2022) on the shifting burden of proof once an appellant has made out a prima facie case (para 29).
The Tribunal held that the Appellant did not sufficiently support its objection to the additional VAT and corporation tax assessments and therefore did not discharge its burden of proof. It found the Respondent's additional assessments in the Objection Decision dated 15th September 2025 to be justified (para 30).
Outcome
The Tribunal held that the Appeal lacked merit and dismissed it. The Respondent's Objection Decision dated 15th September 2025 was upheld. Each party was ordered to bear its own costs (para 31).
Major issues / areas of contention
- Whether the Respondent's Objection Decision dated 15th September 2025 was justified.
- Whether the additional assessment was raised on an incorrect reconciled banking variance.
- Whether the Respondent incorrectly computed additional VAT from what the Appellant asserted were exempt sales of dry maize supplied for milling.
- Whether the Respondent erred in disallowing 40% of purchases for lack of supporting receipts.
- Whether the Respondent contravened Section 3(2)(i) as read with Section 4 of the Income Tax Act (cap. 470).
- Whether the Respondent used a speculative approach in raising the additional tax despite documentary evidence provided.
- Whether the Respondent breached the doctrine of legitimate expectation.
- Whether the Appellant discharged its burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.